The Role of Food Stamps in the Recession

by Ben Senauer,
University of Minnesota

The food stamp program—renamed the
Supplemental Nutrition Assistance Program
(SNAP) in 2008—has been a lifesaver
since the economic downturn.[1] Average
monthly participation grew from 26.3
million people in fiscal year 2007 to 44.7
million in FY 2011, and then to 46.5 million
by December 2011, when one in seven
Americans were enrolled. The 76.8 percent
increase reflects the severe financial hardship
in many households resulting from the
Great Recession and the slow recovery.

The budgetary cost of the program rose
along with participation, from $30.4 billion
in 2007 to $71.8 billion in 2011. Nevertheless,
without the benefits that SNAP
provided—on average $133.85 per month
in 2011 per participant (up from $96.18
in 2007) and $535.40 for a four-person
household—the situation for many Americans
would have been dire. Today, with accelerated
economic growth and a stronger
job market, participation can be expected to
decline, as it did after past recessions.[2]

The growing role of food stamps can
be traced to the Clinton administration,
when the largest federal welfare program for
the poor, Aid to Families with Dependent
Children, was replaced by Temporary Assistance
for Needy Families (TANF). TANF
had clear pluses while there were job openings.
But when TANF's stricter time limits,
work rules, and federal spending caps ran
up against the Great Recession's loss of jobs,
most poor families had no coverage. Participation
in TANF increased only slightly.[3]

The two main supports for struggling
low-income households became unemployment
benefits and SNAP.

From Food Stamps to SNAP

Food stamps started in the 1960s and were
substantially expanded under the Nixon administration
in the 1970s. In the 1990s,
the program switched from using coupons
to electronic benefit transfer (EBT) cards,
now accepted at more than 170,000 retail
stores. Each month, the benefit amounts
for participating households are added electronically
to account balances on the cards.
SNAP benefits can be used only for "food
at home" and cannot be spent on food purchased
from restaurants or on prepared
foods at deli counters.

To receive SNAP benefits, households
must meet certain requirements. A household's
gross monthly income cannot exceed
130 percent of the federal poverty level,
which was $2,442 per month for a family of
four in FY 2012. Monthly net income cannot
be more than 100 percent of the poverty
level, which is $1,863 for a family of four
after deductions from gross income (20 percent
of any earned income, a standard perperson
deduction, specified medical expenses,
dependent-care costs, training, education,
and certain excess housing expenses). With
changes in the late 2000s, financial asset tests
were effectively eliminated, which substantially
expanded eligibility.[4]

Participants' monthly SNAP benefits,
referred to as allotments, depend on the
number of family members in a household
and net income. A basic principle is that
low-income households should spend 30
percent of their own income to buy food.
Only the poorest households receive the
maximum allotment, which in FY 2012 is
$200 monthly for a single person and $668
for a family of four. Each dollar added to
a household's net income reduces its SNAP
benefits by 30 cents. The benefit level is updated
annually on the basis of the Consumer
Price Index (CPI) for food.

Many of the principles that welfare experts
advocate are embodied in SNAP. The
program has uniform national standards.
The federal government covers the total
cost of benefits and half of state administrative
expenses. Coverage is universal. Funding
for the program is required to expand to
meet the benefit allowances of all those who
are eligible. The incentive to work is strong,
since SNAP benefits are only reduced by 30
cents for each $1 earned until the eligibility
threshold is reached.

Effectiveness

The elderly and the young represent more
than half of SNAP beneficiaries. In FY
2010, 47 percent of SNAP recipients were
children under age 18, and an additional
8 percent were 60 and older.[5] Forty-one
percent of SNAP participants lived in a
household that had income from working
(the working poor). Only 8 percent received
cash welfare payments under TANF
in 2010, whereas 42 percent had received
cash welfare benefits in 1990, prior to welfare
reform.

A recent U.S. Department of Agriculture
study examined the effects that SNAP
has on poverty and found that a significant
improvement in the well-being of recipients
was attributable to the program.[6] In 2009,
the most recent year analyzed, 93.0 percent
of SNAP benefits went to households with
incomes at or below the federal poverty level
(that would be $22,356 annually for a family
of four in FY 2012), and 55.8 percent went
to households living in "deep" poverty, which
is defined as less than half the poverty rate.

SNAP benefits are not counted in assessing
poverty. The inclusion of SNAP
benefits would reduce the number of households
living below the poverty level by 7.7
percent in 2009 and the number of children
living in poverty by 9.8 percent. For households
remaining below the poverty level,
SNAP raised the average poor family 14.6
percent closer to the poverty level in 2009,
an effect referred to as "closing the poverty
gap." For children, the poverty gap was reduced
by 20.9 percent in 2009.

One study notes 2010 was the first time
that SNAP benefits accounted for more than
one-tenth of all the purchases of food at supermarkets,
grocery stores, and other food
retailers.[7] Another study reported a positive
economic impact on recipients' communities.
Every $5 in new SNAP benefits was
found to generate $9.20 in total spending in
local communities.[8] There is a clear multiplier
effect as the additional spending circulates
through the economy and creates more jobs
and additional spending.

New England

Between FY 2007 and FY 2011, SNAP
participation increased by more than 50
percent in every New England state. (See
"Supplemental Nutrition Assistance Program
in New England.") The change largely
reflects the 2007-2009 recession and its
aftermath.[9] Four of the states witnessed a
greater increase in SNAP participation than
the national gain of 69.9 percent. Rhode
Island suffered one of the largest jumps in
unemployment nationally, which explains
the 135 percent-plus increase in SNAP participation.
The state's unemployment was
still 11.0 percent as of February 2012.

Photography by Rachel Bissett

In the population census year 2010,
both Maine and Vermont had a greater percentage
of residents participating in SNAP
than the nation as a whole. Maine's participation
rate was the highest in New England,
and Connecticut's the lowest. Overall,
SNAP benefits to New England households
amounted to nearly $2.9 billion in FY 2011.

Given that the welfare reforms of the
late 1990s required recipients to find work
fairly quickly, today's slow recovery and slow
job growth have made food stamps increasingly
important for low-income Americans.
Until the economy improves significantly,
even poor people who have jobs are going
to need the lifeline that SNAP offers.

Ben Senauer,a professor in the department
of applied economics at the University of Minnesota
in St. Paul, has focused his research over
many years on federal food and nutrition-assistance
programs. Contact him at bsenauer@umn.edu.

[6] Laura Tiehen, Dean Jolliffe, and Craig Gundersen,
"Alleviating Poverty in the United States: The Critical
Role of SNAP Benefits" (Economic Research
Service, U.S. Dept. of Agriculture, Economic Research
Report no. 132, April 2012).
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[7] Parke Wilde, "The New Normal: The Supplemental
Nutrition Assistance Program (SNAP)," American
Journal of Agricultural Economics, forthcoming.
[Return to endnote in story]

[8] Kenneth Hanson and Elise Golan, "Effects of
Changes in Food Stamp Expenditures across the
U.S. Economy" (Food Assistance and Nutrition
Research Report 26-6, Economic Research Service,
U.S. Department of Agriculture, Washington, DC,
August 2002).
[Return to endnote in story]

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